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Three Views of the 'Fiscal Cliff'

May 23, 2012 by Matthew Denhart

Edward P. Lazear, The Wall Street Journal Discussion of the so-called fiscal cliff — the combination of tax increases and spending cuts that will come in 2013 if Congress and the president don't act — confuses a number of different issues. The evidence suggests that we should fear the tax hikes, but not necessarily the spending cuts. Anyone who uses the term "fiscal cliff" accepts a Keynesian view of the economy, knowingly or not. Both tax increases and constrained spending are assumed to be bad for the economy. But there are two other views: that of the budget balancer and that of the supply-sider. Rather than term the impending changes that will occur in 2013 a "fiscal cliff," the budget balancer thinks of this as "fiscal consolidation." Tax increases reduce the deficit, as do cuts in government spending. Both are austerity measures that make the government more responsible and, therefore, both are conducive to long-run economic growth. Read More (Requires Subscription)


Author

Matthew Denhart
Matthew Denhart

Matthew Denhart is an expert on immigration policy and is the author of the Bush Institute’s America's Advantage: A Handbook of Vital Immigration and Economic Growth Statistics, now in its third edition. He currently serves as executive director of the Calvin Coolidge Presidential Foundation and is a founder of the Coolidge Scholars Program which provides full-ride merit scholarships to America's most promising college students. A summa cum laude graduate of Ohio University, Denhart has written and spoken widely on a variety of policy topics including the economics of higher education, labor, and taxes. He has contributed articles to numerous national publications including The Wall Street Journal, Forbes.com, CNN Opinion, and Bloomberg View. 

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